Where Are You Actually Storing Cash Right Now? – Episode 672

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[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, we’re going to be talking about where people are actually storing cash right now. And this is for 2026. We are seeing a stock market that even the most, I’ll put, this is what I’m seeing with the stock market. I think you could talk to a toddler and then you could talk to Warren Buffett and both might be right and both might be wrong. It’s that unpredictable. We’re also seeing interest rates that are unpredictable. There we go. So, Kim, where are people putting cash right now? Well, that is my favorite question, second only, maybe, to how do you like to learn? Do you like to read, watch, or listen? So where do you store your cash? And the reason it’s my favorite question is because cash is the solver of emergencies

[00:59] and the take-advantager, I know that’s not a word, but the take-advantager of opportunities. We use cash to solve emergencies and take advantage of opportunities. And so every single family wants to be in a position of cash and so many people are not. And part of the reason that they’re not, they don’t have an emergency fund and worse, they don’t have an opportunity fund. And part of the reason is because for most of the typical places where people store cash, it’s a really boring space and it has been for years. It’s money markets at brokerage houses. It’s maybe savings accounts at banks or credit unions. I mean, there just isn’t a good place to store cash unless you look at whole life insurance, W-H-O-L-E, the kind that’s been around for a couple hundred years,

[01:48] as a alternative to cash. So whole life insurance is an asset. It is actually called cash value and it is a perfect position of cash. And I’m recommending that sometimes people have up to 40% of their asset base in cash because if they’re heavily invested in real estate or they’re heavily invested in a private company like a family company, it’s so critical that they be able to solve emergencies and take advantage of opportunities. And in order to do that, they need to have a larger position of cash than your basic W-2 family. Even your basic W-2 family, I find this all the time. I’ll say, well, do you have your emergency fund funded? And they kind of look at me like, well, you know, maybe, well,

[02:35] do you know what your emergency fund number is? And they don’t. Or the husband’s got, you know, 20 grand in his head and the wife has 100 grand in her head. Well, guess what? Then it needs to be 100 grand. Like, it doesn’t matter whose, but it needs to be the highest number. And then that is a line in the sand. Stop thinking about emergencies. Fund it, put it in cash, put it wherever you want to put it. If you want your emergency fund, if you want to put it under the mattress, in a safe in the closet, in the vault, wherever, put it there. But then build that opportunity fund. And the absolute best place to store your opportunity fund is a mutual life insurance company. So we’re talking Guardian, New York Life, Mass Mutual, Northwestern Mutual,

[03:23] Penn Mutual, Lafayette, like those types of companies. That is the best place to store cash. And I can prove it numerically if somebody really wants to see it. Oh, I love it. OK, so I did some research while you were talking because, well, one, I’m an AI nerd and I have to, two, because I want to add context to the conversation. So here we go. You said the number, if I recall, up to about 40%. Is that correct? Right. OK, so we’re going to do a drum roll. We’re actually not going to do a drum roll because this is a podcast. But I went and pulled up Berkshire Hathaway’s stats for right now. And right now, as of today, Berkshire Hathaway is holding 42%, is holding, right here, equity portfolios, $288 billion.

[04:15] So cash is 58% of investable assets versus 42% in stocks. And it is going like this, meaning they’ll be at 40%, and then sometimes it’s up, and then sometimes it’s down. So it is exactly in line with what you’re saying. Whereas the young bucks out there, they’d be like, what, 5%? Maybe, what, 10%? Yep. It doesn’t work that way. So you have gone and seen the cycles work through. There’s another element. Our audience knows this, which happens to be with whole life insurance, that it’s not cash that is locked in the vault that you cannot access. It is cash that you can use. Help us understand that, what that looks like versus cash that’s not doing anything. Absolutely. So people forget about a concept called

[05:18] the time value of money. And that just says that if you have a dollar and you are marching through time, which, of course, you are all the time, it is needing an interest rate in order to just even maintain or beat inflation. And that’s really what time value of money is. And so when we withdraw savings, so if we store our cash in savings account and we withdraw the savings, we disable our dollars to continue to grow with the time value of money. A lot of YouTubers refer to this as the compound interest curve. In other words, every person starts life at zero, and they literally have one, think about it like a slow hockey stick, and then, you know, slow at the beginning, faster at the end. That is their compound interest curve.

[06:10] And if they withdraw savings or they withdraw money out of their money market to solve an emergency or take advantage of an opportunity, they are reducing, stopping, withdrawing from that compound interest curve. They have stopped the time value of money working for them. Alternatively, if they will borrow against it, now you can borrow against a savings account, you can borrow against a CD, you can borrow against cash value of life insurance, you can borrow against your home equity, you can borrow against a lot of different things. But if we just utilize a very old structure, the mutual life insurance company, whole life policy, it has natural borrowing provisions in it. You don’t have to go to the bank,

[06:53] you don’t have to sign a form, you just pick up the phone, click the button online, whatever your method of business is, and you get your dollars lent against. So borrowed against on your side, lent against on the insurance company side. So let’s say I have 100 grand in cash value and I need $60,000 because I have a down payment on a piece of real estate, and it’s probably a small piece of real estate, but that I can go do, I’m just using easy math. So instead of withdrawing 60,000 and only having 40,000 left in my account, I’ll leave my 100,000, I’ll say that again, I’ll leave my 100,000 in the cash value of the whole life insurance policy, and I will borrow the insurance company’s money to put the 60,000 in my pocket

[07:46] to go do the down payment on the deal. So I have borrowed against, my 100K is still growing unaffected by the loan. I only have 60K in my pocket to go do my deal, and there is not a net of 40 because my 100K is still growing. Now there’s a really critical point that I wanna make, but let me just pause and see if I’ve laid the landscape clear. Oh, it’s really clear. And fortunately, you’re not playing weird math gymnastics, which happens in YouTube finance world. Yeah, isn’t that the truth? And this is one of the areas that it happens. So when people look at that transaction, they want to compare the interest rate on the loan, the 60,000, to the interest rate on the growth of the cash value, 100,000.

[08:36] Well, first of all, you shouldn’t compare those two because one is 100,000 and one is 60,000, and you should not net. Us human beings, we like to simplify things. We wanna net. We wanna take one from another and try to just reduce it down to a single number. Do not do that. You confuse yourself. So cash value today is growing at about 4%. That’s after the cost of death benefit, after the cost of running the company, after the commission that you pay to buy the policy, net, net, net, net, your cash value is growing at about 4%. Most loans today are five to 6%. Let’s just say it’s 5% for easy math. That, however, not only does that not work, even though it is 4% growth on 100,000, 5% cost on 60,000,

[09:21] you still, you look at that four and the five and you say, well, I can’t get ahead. You’re not supposed to. Those are not the wrong, those are the wrong two numbers to compare. Those are not what should be compared. The 4% growth of cash value, which by the way is without taxes. So for a lot of families, that’s like a 6% or 7% equivalent. The 4% growth of cash value should be compared to the 2.5% that the bank is paying you, which by the way is taxable. And the 5%, I couldn’t remember if I said five or six, the 5% cost of loan on the 60,000 should be compared to a credit card, a home equity line of credit, which is 9%. Credit card’s what, 15, 18, 24, depending on who you’re docking to. That’s what your 5% cost of loan should be compared to.

[10:15] Or maybe even a mortgage rate at 6.5 or whatever today’s interest rates are for mortgages. I’m not a big fan of borrowing against cash value for a mortgage, because you can go get one very easily at a bank. But nevertheless, for down payment on a piece of real estate, that is fabulous. So now we’ve got four different interest rates that we’re dealing with. And yes, it can get a little unwieldy, but not if you keep the lanes straight. So you’ve got an asset called cash value, it’s growing at four. You compare that to any other cash at two and a half. And you have a loan called a cash value loan that’s costing you five, and you compare that to home equity line at 9% or a credit card at, call it 18.

[11:00] And if you keep those four lanes straight, cash and savings versus loan against the cash value and loan at the credit card company, then you will know exactly what’s going on and you won’t get confused by the YouTubers. Oh, I like that. I’m gonna stack a couple of elements, and I wanna keep it simple, but stacking these elements because these are frequently asked questions. And it’s this, the approval process. And so right now, there’s a group, I’m not gonna use the name because I don’t want credit to go. It’s called the bro group, okay? It’s a bunch of guys that are trying to max out their investments and get as leveraged as possible. And so they’re trying to take out loans like crazy now. And that’s great if that’s what they’re doing

[11:52] and they’re using sound advice. The problem is those can be called due at any time. Can that happen on the life insurance? No, because it’s fully collateralized and you control it. You’re the owner of the policy. You get to say who, when, what, and why, and your dividends still get paid on the full 100,000 and it doesn’t matter whether your insurance company is direct recognition or non-direct recognition, another thing the YouTubers have made confusing. And so I have had at various times in my life, numerous loans against cash value and sometimes very large numbers and they haven’t ever done anything but do exactly what they’re supposed to do, which is charge me interest once a year. And so it is a very safe space

[12:36] because it is fully collateralized. And there is no approval process. If I want a loan, I push a button online. Now, if it’s over a hundred grand, I’m gonna have to jump through a couple hoops, but I’m not going through an approval process. I’m not providing tax returns. I’m not providing financial statements. I’m not providing a business plan or anything else. Okay. That was pretty settled. I don’t know if the YouTubers can beat that one. Here’s the next piece to it, which is this. Because we’ve now talked about the approval process that’s off the table, the next one is often talked about of how long is this locked up for? Meaning, oh, I wish that I could take advantage of that opportunity, but I just can’t

[13:18] because my money is locked up. So life insurance cash value is never locked up. I mean, if it’s already borrowed against, then fine. So like in my example, if you had a hundred thousand and you borrowed against 60,000 to go do a down payment on a real estate deal, and then that very real estate deal turned around and the day after closing, it caused you a problem that was 20 grand. Then you would just go and get another $20,000 loan against your hundred thousand that’s already there. So now we have 80,000 borrowed against it. End of story. All right, that helps, that helps a lot. Kim, what you did is you helped share something that has worked for centuries, not something that is working for the moment right now

[14:00] on gaming the system right now. For any of you listeners, if you’re trying to set up the foundation, you gotta have a clear picture. Send an email, tellhelloatprosperitythinkers.com. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit prosperitythinkers.com.